President Anura Kumara Dissanayake revealed today (18) in Parliament that the government has successfully reached an agreement with the International Monetary Fund (IMF) to revise the Pay As You Earn (PAYE) Tax thresholds.
The Head of State announced that the monthly tax-free income limit under the PAYE system would be increased from Rs. 100,000 to Rs. 150,000. This decision follows discussions held with the IMF as part of the third review of the Extended Fund Facility (EFF) for Sri Lanka.
Key Changes Announced
- Income Tax Threshold: The tax-free income threshold has been raised to Rs. 150,000 per month.
- First Income Tax Bracket: The first bracket of taxable personal income has been revised from Rs. 500,000 to Rs. 1 million, now subject to a 6% tax rate.
Tax Exemptions Explained:
- An individual earning Rs. 150,000 per month will now be fully exempt from PAYE tax.
- For those earning Rs. 200,000, 71% of their income is tax-exempt.
- For Rs. 250,000, the exemption stands at 61%.
- For Rs. 300,000, the exemption is 47%.
- For Rs. 350,000, the exemption is 25.5%.
President Dissanayake emphasized the progressive nature of the revisions, stating, “We have succeeded in revising the PAYE Tax, with greater relief for lower-income earners while ensuring higher contributions from those with larger incomes.”
The revisions aim to ease the tax burden on middle and lower-income groups while maintaining fiscal discipline as part of Sri Lanka’s commitment to economic reforms under the EFF program.
